A Foreign National or an entity incorporated outside India can invest and own a Company in India by acquiring shares of the company, subject to the FDI Policy of India. In addition, a minimum of one Indian Director who is a Indian Resident, is required for incorporation of an Indian Company along with an address in India.

Investment and acquisition of equity shares of a Company can be broadly divided into two categories: investment under automatic route and investment under Government approval route.

The automatic route requires no requirement of any prior regulatory approval for investment in equity shares of an Indian business and only post facto filing/intimation with the Reserve Bank of India within 30 days of receipt of investment money in India and filing of prescribed documents and particulars of allotment of shares within 30 days of allotment of shares to foreign investors.

. Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India. Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI).

Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices cannot undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

Export/Import of goods

Rendering professional or consultancy services

Carrying out research work, in which the parent company is engaged

< li> Promoting technical or financial collaborations between Indian companies and parent or overseas group company

Representing the parent company in India and acting as buying/selling agents in India

Rendering services in Information Technology and development of software in India

Rendering technical support to the products supplied by the parent/ group companies

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

The Memorandum of Association (MOA) states the main and ancillary objects of the proposed company. The Articles of Association (AOA) contains the rules and procedures for the routine conduct of the proposed company.

Yes, a company’s address can be changed after acquiring a commercial space. The process of change of company address is very easy and it can be done within hours if the new address is within the same city.

Yes, legally a salaried person can become a director of a company. However, the terms and conditions mentioned in his/her employment agreement may have some clauses that might require an expert advice. We recommend you to speak to us before proceeding in order to make an informed and wise decision.

Prior approval of RBI required for BO (other than undertaking manufacturing and service activities in SEZ's), Prior approval not required to set up PO if certain conditions are fulfilled

If activities / sector fall under the ambit of the automatic route, no prior approval required but only post-facto filings to be undertaken with the RBI. In other cases, GoI / FIPB approval required and thereafter post-facto filings required to be undertaken with RBI

Foreign investments allowed in sectors, which are under 100% automatic route with prior GOI / FIPB approval. The sectors should also not be subject to performance linked conditions

Permitted activities

Only liaison / representation / communication role permitted. No commercial or business activities allowed to be undertaken

Activities listed / permitted by RBI allowed to be undertaken, manufacturing and processing activities (except in SEZ units) not permitted for BO. PO is permitted to undertake only specific activities in relation and incidental to the execution of the project

Any activity specified in the memorandum of association of the company. Wide range of activities permitted, subject to FDI guidelines

LLP should be engaged in sectors / activities for which 100% FDI is allowed without any approal. LLP's with foreign investment will not be elgible to make any downstream investments

Funding of local operations

Local expenses to be met out of inward remittances received from abroad from the head office through normal banking channels

Local expenses to met through inward remittances from head office or from earnings from permitted operations

Funding to be through equity or other forms of permitted capital infusion or borrowings (local as well as oerseas as per prescribed norms) or internal accruals

Contribution in the capital of the LLP should be through inward remittance or by debit to NRE/FCNR account of the designated partner. LLP's are not eligible to raise ECB

Limitation of liability

Parent company liable for acts of LO

Parent company liable for acts of BO/PO

Liability limited to the extent of equity participation in the Indian company

Liability of the partners is limited to their agreed contribution to the LLP except in case of fraud, wrongful act, etc

Required to file an annual activity certificate (from auditors in India with RBI). In case of multiple LO's the nodal office could file a combined annual activity certificate with respect to all its offices in India

Required to file an annual activity certificate (from auditors in India with RBI) In case of multiple BO's the nodal office could file a combined annual activity certificate in respect of its offices in India

Required to file periodic and annual filings relating to foreign liabilities and assets, reciept of capital and issue of shares to foreign investors

No filing requirements prescribed as of now

Compliance requirements under the Income tax act

Since LO is not permitted to undertake any business activity in India, it is typically not subject to tax in India. Howeer, LO is required to undertake annual compliance by filing annual information in the precribed form

Liable to be taxed on income earned at the rate applicable to foreign corporations. 40% plus surcharge and education cess. In case above tax is not applicable than MAT is considered to be applicable to BO/PO at rate of 18.5% plus surcharge and education cess of its book profits. No further tax on repatriation of profits, which are permissible in both cases. Indian transfer pricing regulations are applicable

Liable to be taxed on global income at 30% plus surcharge and education cess on a net income basis. In case above tax is not applicable than Subsidiary company liable to MAT of its book profits. Dividend declared freely remittable but subject to distribution tax of 15% plus surcharge and edu. cess on dividends, pursuant to which dividend is tax free for all shareholders.Distribution tax to be paid only on amount of dividend.

Liable to be taxed on global income at 30% plus education cess on net income basis. In case above tax is not applicable then LLP liable to MAT at the rate of 18.5% plus cess of its book profits no DDT leived on profit dustribution and Indian transfer pricing regulations are applicable.

Permanent establishment (PE)

LO's generally do not constitute PE under DTAA due to limited scope of actvities in India. However, if the activities of the LO go beyond the realm of preparatory or auxiliary character as provided for in the DTAA, a PE/taxable presence is likely to be constituted

Generally constituting a PE and a taxable presence under DTAA and domestic IT proisions

An independent taxable entity and not a PE of the foreign company

An independent taxable entity; however, whether interest in LLP results in PE for a foreign partner, is still an ambiguous position under LLP

Repatriation of funds on ongoing basis

Typically the LO is not permitted to undertake any business activity in India; as such,there may not be any repatriations from the LO. However, in case of closure of the LO, any surplus money may be repatriated with RBI approval

Approval not required for remittance of post-tax profits to the HO outside India, subject to filing of requisite documents to the RBI

Subsidiary does not require any approval for remittance of post-tax profits; dividends declared will be subject of distribution tax

LLP does not rquire any approval for remittance of post tax profits

Exit mechanism

Prioir approval of RBI, ROC and income tax authorities

Prioir approval of RBI, ROC and income tax authorities

Exit can be through sale of shares or winding up or liquidation

Foreign partner permitted to transfer its stake in LLP and can also dissolve the LLP